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How Brazil benefits from the instant coffee boom

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As inflation drives up world coffee prices, cheaper robusta beans are in high demand – and Brazil could be the market to supply it.

Although robusta production has traditionally been largely the responsibility of the main Vietnamese supplier, farmers have not been able to increase production fast enough to meet growing consumer demand.

As its production plateaus, the world’s second largest robusta producer is picking up speed. Brazil’s production is set to hit a new high this year, with the US Department of Agriculture predicting its robusta production will rise 5% this year as Vietnam retreats.

“Brazil has a lot of room to increase coffee production by converting pastures to robusta crops,” said Fernando Maximiliano, analyst at StoneX Financial in Sao Paulo. “Vietnam has no room to develop.”

Robusta coffee, widely used to make instant coffee like Nestlé’s Nescafe brands or as a blend in espressos, was once seen as a poorer alternative to premium arabica beans, which are traditionally favored by companies such as Starbucks. But it has made a comeback, especially for its convenience and improved taste.

Consumers around the world are still drinking more arabica-based beverages, but with households and businesses facing the worst inflation in more than four decades, more shoppers are giving the robusta bean another look at low price, despite its reputation for overwhelming strength and bitterness.

As single-origin arabicas are more expensive, a serving of robusta is often added to espresso-based beverages prepared externally, contributing to increased demand.

In the United States, consumption of espresso drinks has jumped 30% since the start of the Covid-19 pandemic, signaling not only a recovery from the crisis but also new growth, according to a survey published in March by the National Coffee Association. . International demand for instant or soluble beverages has also increased, including in Asia and Eastern Europe.

The price gap between arabica and robusta has only widened in recent years, largely due to harvesting issues.

Last year, Brazilian production of mild-tasting Arabica beans plunged due to drought and frost. Colombia, ranked second, has lost about 20% of its production in the past two years due to excessive rains caused by La Nina. Shipping bottlenecks only added to the woes.

As Arabica production in Brazil stagnates, Robusta is taking off.

Robusta is a sturdier and taller plant, can grow in warmer places, is more drought tolerant, and contains about double the amount of caffeine. At the same time, its production has become more professional, yields have increased and farmers are expanding to new areas.

Since 2016, when a drought decimated robusta production, farmers have invested in irrigation and harvesting techniques, adding to the expectation that 2022-23 will bring a bumper harvest. While its bitter taste has traditionally made it a “blend” variety, even that is changing, with some gourmet products now made with 100% Robusta.

“The sensory characteristics of Robusta have completely changed due to the technology and crop treatments that farmers have applied at all stages of production,” said Celirio Inacio, executive director of Sao Paulo-based industrial group ABIC.

Robusta tree planting has increased in northern states such as Rondonia and Mato Grosso, but growth potential could be hampered by competition with grain growers for land, said Guilherme Morya, an analyst at Rabobank in Sao Paulo.

“The potential of Brazilian robusta is enormous. The only problem is that it rivals cereals, where the margins have been spectacular,” he said.

Increased robusta production in Brazil would bring some relief to roasters and consumers, especially in Europe, where the war-exacerbated natural gas crisis in Ukraine has aggravated soaring energy costs, leading to inflationary pressures. Arabica futures prices in New York have doubled in the past two years, while Robusta has jumped 57% in London.

Farmer Bento Venturim, 74, is part of Brazil’s robusta revolution. The son of an arabica grower, Mr. Venturim began adapting the techniques and machinery used on arabica crops at his robusta farm in the state of Espirito Santo in the 1990s; changes have included irrigation and micro roasting.

His family farm now exports specialty coffee. In Brazil, the Venturim family sells its own brand and supplies premium coffees. Its coffee sometimes achieves a premium of up to 130% over regular robusta.

Updated: July 16, 2022, 5:00 a.m.